As expected, AOL Time Warner reduced its revenue and cash flow projections
for the fourth quarter and for the full year 2001, based largely on the decline
in the advertising market.
In a conference call with analysts, AOL Time Warner said it expects
fourth-quarter revenue growth to be about 3 percent to $10.5 billion and
cash flow to rise about 14 percent to more than $2.7 billion.
The company is scheduled to release its full fourth quarter and year-end
results on Jan. 30.
AOL Time Warner had earlier reduced its revenue and cash flow guidance for
2001, stating in September that year-end revenue should rise by about 5-to-7
percent and cash flow would increase about 20 percent. Those September guidance
numbers were significantly lower than the 12-to-15 percent revenue growth and 30
percent cash flow increase the company had predicted in January 2001, when the
merger between America Online Inc. and Time Warner Inc. was completed.
In the conference call, AOL Time Warner CEO Gerald Levin - who will retire in
May - said that the company had performed well in a down economy, but admitted
that earlier performance goals 'proved to be too high.'
Co-chief operating officer Richard Parsons - who takes over as CEO after
Levin's retirement - said that the company will not make that mistake again.
'Going forward, our assumptions regarding future economic conditions will be
more conservative,' Parsons said.
AOL Time Warner's 2002 projections do not assume any rebound in the
advertising or overall economy, Parsons said. As a result, the company expects
2002 revenue to grow between 5 percent and 8 percent and cash flow to rise
between 8 percent and 12 percent.
Parsons added that AOL Time Warner's focus in 2002 will be on rolling out new
products like digital television, video-on-demand and subscription VOD and in
signing on multiple Internet service providers to its high-speed data
The company will also take a first quarter non-cash charge of between $40
billion and $60 billion because of new federal accounting standards that require
new measurement methods for goodwill and intangible assets resulting from
mergers. The company said the one-time charge will have no effect on operations
and will reflect overall market declines since the merger of AOL and Time Warner
was announced in January 2000.